Sustainable Development, Sustainable Debt: Understanding debt sustainability & Africa's development challenges

The International Monetary Fund (IMF) has been at the forefront of discussions around debt sustainability and development challenges in Africa. CNBC Africa's Kenneth Igbomor sat down with IMF's Deputy Director for Africa Department, Dominique Desruelle, to delve into the key takeaways from the recent international conference in Dakar, Senegal. The conference brought together several African presidents and leaders to discuss the pressing issues of financing development in a sustainable manner. Desruelle emphasized the importance of financing development projects in a sustainable way to ensure continuous growth and progress. He noted the need to strike a balance between addressing development needs, such as infrastructure and social services, while also tackling security threats in the region. The discussions highlighted the complexities of managing debt levels while ensuring investments are made in the right areas to drive economic growth. One of the key indicators Desruelle pointed out was the ratio of debt service to fiscal revenue, which can signal a country's financial health. High debt service ratios can cripple a country's ability to invest in critical sectors like healthcare and education. He underscored the need for African countries to focus on increasing tax revenue by broadening the tax base and closing loopholes to enhance revenue generation. The IMF official addressed the challenge of managing budget deficits and emphasized the importance of tracking deficits over time to assess their impact on debt sustainability. He highlighted the dichotomy between countries that faced severe economic shocks, leading to increased debt levels, and those that managed debt effectively by investing in productive assets. Desruelle also delved into the impact of interest rates on African countries, especially those reliant on external borrowing. He cautioned against over-reliance on foreign markets for debt issuance, stressing the importance of striking a balance between domestic and foreign borrowing to mitigate risks. He emphasized the IMF's role in providing technical assistance to governments in formulating effective debt management strategies. The IMF deputy director acknowledged the progress made by African countries in strengthening debt management practices but also underscored the need for continuous improvement. He emphasized the importance of transparency in debt management to build investor confidence and mitigate risks associated with borrowing on international markets. In conclusion, Desruelle's insights shed light on the complexities of managing debt and fostering sustainable development in Africa. The IMF's partnership with African countries in enhancing debt management practices and promoting transparency is crucial for fostering economic stability and growth in the region.